Paper value

Katrin Radmacher's forthcoming interview with Tatler magazine optimistically predicts that as a result of the recent Court of Appeal decision in her case, men and women will no longer have to worry that they are being married for their money (see Solicitors Journal 153/26, 7 July 2009).

Whether the lords' decision to overturn Ms Radmacher's former husband's £5.6m award and replace it with £700,000 plus a housing fund and capitalised maintenance for 15 years will have that effect waits to be seen. What is clear, however, is that the decision in Radmacher v Granatino [2009] EWCA Civ 649 will not only change the way family lawyers advise their clients, but it will also force the Law Commission to grapple with a number of interesting and difficult concepts.

Over the last decade or so, properly negotiated prenuptial agreements, not vitiated by any abuse or manifest unfairness, have been given increasing weight by the English family courts, but ultimately judges in the Family Division retain their absolute discretion to decide what is a fair outcome. If there is to be a departure from this position then, as Thorpe LJ suggested, 'wholesale reform is for Parliament and not the judges, particularly now the Law Commission is at work'.

How will the Law Commission take matters forward? Reconsideration of section 25 of the Matrimonial Causes Act 1973 is not high on the government's agenda. But, without reconsideration a prenup will always be subject to the court's overriding discretion, and the courts will need to consider whether the agreement reached between the parties is fair both from an administrative perspective in terms of the safeguards that parties should comply with when signing up to a prenup and as to the terms themselves.

In Radmacher, the fact that the agreement was binding in both Germany and France should have 'fortified a conclusion that the contract should carry decisive weight in the rejection of the husband's claims', but what if the husband and wife had been from two less legally developed countries than France and Germany respectively?

Exploitation of 'superior strength'

Lord Justice Wilson's view was that the law should start from a 'formal presumption of dispositiveness' so that both parties should be required to accept the consequences of whatever they have freely and knowingly agreed. Each party 'to a properly negotiated agreement is a grown up and able to look after him or herself [but] at the same time we must be alive to the risk of unfair exploitation of superior strength'. Herein lies the difficulty. How does one deal with the exploitation of superior strength and is the use of such strength always obvious?

Can it really be said that there can ever be anything other than improper pressure in negotiating a prenup, given social factors where there exists financial inequality between future spouses and where the law in relation to unmarried couples is all but non-existent? Even if it can, one does not need to entertain an overly paternalistic view of the appropriateness of judicial intervention to express scepticism about the background to negotiating prenups. Individuals can do very unwise things, things that are anything but mature and sensible, even when they consult a solicitor. Would it be fair to hold them to these agreements just because they have signed them? Clearly, any safeguards the Law Commission suggests to ensure fairness need to be more than mere window dressing, they need to provide real guidance on how to weed out those agreements in which there has been improper pressure placed on one party.

The Law Commission also needs to ensure equality between sexes. It is overly simplistic to suggest that had Mr Granatino been a woman he would have been awarded more than he has now received. But, it is interesting to contrast the outcome of Radmacher with the recent case of McFarlane, in which Mrs McFarlane's already high maintenance award (which exceeded her needs) was increased further as a result of her former husband's increased earnings, as much weight was given to Mrs McFarlane's career sacrifice. In Radmacher, Mr Granatino was seemingly disadvantaged by his past career success and his commercial awareness he was attributed with at the time of signing the agreement.

'Magnetic importance'

So, where do we go from here? There is much to be said for upholding prenups in the right circumstances to avoid the stress, anxieties and expense of contested financial proceedings further down the line. The current law 'enables the court to apply common sense to a situation' and the court has shown that, in considering all the circumstances, the existence of a prenup can be a factor of 'magnetic importance'.

While the Radmacher case is a welcome clarification as to the judiciary's approach, until reform of the law takes place lawyers will still not be able to say to clients that their prenuptial agreements will be binding; only that if the right hoops are jumped through in terms of signing up to the agreement and the agreement is not manifestly unfair in the future, it should be upheld by the courts. That said, given the Court of Appeal's decision, any party looking to protect and/or preserve monies in the event of divorce would be well advised to sign up to a prenup (and after their marriage a post-nup) and, given the press interest in the Radmacher decision, solicitors can expect an increase in enquiries on the subject going forward.

Brett Frankle's step-by-step guide to drafting a prenup